there is a standard set of instruments, originally proposed by Boone (1996), which include the log of population size and various country dummies, for example, a dummy for Egypt, or for francophone West Africa. One or both of these instruments are used in almost all the papers in a large subsequent literature, including Burnside and Dollar (2000), Hansen and Tarp (2000, 2001), Dalgaard and Hansen (2001), Guillamont and Chauvet (2001), [...]

neither the “Egypt” nor the population instrument are plausibly exogenous; both are external—Camp David is not part of the model, nor was it caused by Egypt’s economic growth, and similarly for population size—but exogeneity would require that neither “Egypt” nor population size have any influence on economic growth except through the effects on aid flows, which makes no sense at all.

it is surely useful to know that although large countries receive less per capita aid in relation to per capita income, they have grown just as fast as countries that have received more, once we take into account the amount that they invest, their levels of education, and their starting level of GDP. [...] But we would hardly conclude from this fact alone that aid does not increase growth. Perhaps aid works less well in small countries, or perhaps there is an offsetting positive effect of population size on economic growth